Service Tax - Case Laws update

1. Services

1.1 Medpro Pharma Pvt. Ltd. vs. CCE, Chennai 2006 (3) STR 355 (Tri-LB)

In this case the Larger Bench while dealing with the issue of C&F Agents services, held that;

1. Isolated activity of freight forwarding is also covered under C&F operations and is taxable under C&F Agent’s services. Freight forwarders known as clearing agents, shipping agents etc. are covered. C&F operations cannot be dissected into ‘clearing’ and ‘forwarding’ and both fall under common category and any service provided in this category will attract service tax.
    

2. Trade understanding based on common sense to be considered for interpreting the services. Expression ‘clearing & forwarding operations’ is compendious nature of services offered by C&F agent and rendering of any one of such service; i.e., either clearing or forwarding will make the service provider liable to service tax.
    

3. Segregation of holistic concept of ‘clearing and forwarding’ into divisible activities is not possible.

The judgment in the case of Kulcip Medicines (P) Ltd. vs. Commissioner 2006 (1) STR 36 (Tri) and Vaman Pharma Pvt. Ltd. vs. Commissioner 2006 (1) STR 274 (Tri) are overruled.

1.2 Laxmi Color (P) Ltd. CCE, Jaipur II 2006 (3) STR 363 (Tri-Del)

In this case the Tribunal following Supreme Court decision in C. K. Jidheesh (2006) (1) STR 3 (SC) held that there is no element of sale of goods in photography service and bifurcation of receipts into element of goods and services does not arise. Deductions for inputs such as cost of paper and other material is not admissible. It is further held that CBEC clarification dated 7-4-2004 providing exclusion of inputs consumed in photography services is beyond the scope of exemption notification No. 12/2003.

Note: The decision of C. K. Jidheesh (supra) is overruled by Supreme Court in Bharat Sanchar Nigam Ltd. case.

1.3 CCE Jaipur II vs. Daya Engineering Works (Sleeper) Ltd. 2006 (3) STR 515 (Tri-Del)

The Tribunal in the present case held that Show Cause Notice issued under section 73 to the assessee, receiver of Goods Transport Operators service is not maintainable as liability to file return cast on the assessee is only under section 71A and not under section 70.

1.4 Zodiac Advertisers vs. CCE Cochin 2006 (3) STR 538 (Tri-Bang)

The appellant was engaged in screen printing of advertisement materials such as stickers, labels and card as per the directions of Advertisers. The department taxed them under Advertising Agency. The Tribunal observed that ‘Advertisement’ is promotion of goods, services, companies and ideas and is highly creative activity. It involves conceptualization, visualization and designing. The Advertising agency is concerned with making, preparing and display or exhibition of advertisement and performance of all the activities is mandatory to be called as Advertising Agency. Therefore it is held that appellant is not an advertising agency and hence not liable to service tax.

2. Interest/Penalties/Others

2.1 Bharosa Colour Lab vs. CCE, Jaipur II 2006 (3) STR 366 (Tri-Del)

In this case appellant paid service tax with interest before the issuance of show cause notice. They have also paid penalty under sections 76 & 77 as confirmed by adjudicating authority. The Commissioner through Order-in-Revision enhanced the penalties. The Tribunal relying on the Extraordinary Tax Payer Friendly Scheme waiving penalty on persons seeking registrations up to 30-10-2004 and on the ratio of decision in Bharat Security Services (2005) (188) ELT 454 (Tri-Del) set aside the enhancement of penalty.

2.2 Jindal Steel & Power Ltd. vs. CCE- Raipur 2006 (3) STR 481 (Tri-Del)

The appellant in this case paid service tax in the month of December, 2002 on services received under Consulting Engineer Services from a foreign company in October 2002 and asked for refund of the same by claiming exemption under notification No. 18/2002 dated 16-12-2002 to the extent of amount paid as R&D Cess. The Tribunal observed that the service tax was paid as per the mutual arrangement between both the parties and the benefit of exemption dated 16-12-2002 is not admissible to the appellant as service tax was become payable in October, 2002 and therefore rejected the appeal.

2.3 A.C. Nielsen Org Marg (P) Ltd. vs. CCE Delhi 2006 (3) STR 503 (Tri-Del)

In this case, the Tribunal held that assessment stipulated in Rule 7(4) of Service Tax Rules, 1994 is on half yearly basis and not on monthly basis. Assessment Memorandum appended to ST-3 to indicate short/excess tax paid for half year period. It is further held that excess payment of tax for month/quarter can be adjusted against other months/quarter within the same half year period. For excess amount paid as per assessment memorandum refund application to be made and short payment of tax should be made good.

It is also held that adjustment of excess service tax paid towards discharge of liability of another half year is admissible only if the value of taxable service along with service tax thereon is refunded as provided in Rule 6(3).

2.4 CCE, Raipur vs. Goel Polymers 2006 (3) STR 527 (Tri-Del)

The department filed appeal belatedly by 67 days. The Department gave reasons for delay that the issue was technically complicated and case laws cited in authorization letter were not got confirmed from respective Commissionerate. The Tribunal did not accept the reasons given for delay in filing appeal as they were too vague and general.